EconGrapher (< 20)

June 2011

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The past week in monetary policy saw interest rate decisions from 9 central banks around the world. Of those reviewing policy settings, only Uruguay adjusted its interest rate, +50bps to 8.00%. The other 8 banks held their interest rates unchanged, those were: Hungary 6.00%, the US 0.25%, Namibia 6.00%, Norway 2.25%, Hong Kong 0.50%, Turkey 6.25%, Czech Republic 0.75%, and Sierra Leone 23.00%. Also of note was the US FOMC statement which referred to the completion of QEII (the second round of quantitative easing), and an intention to keep reinvesting principal payments. Meanwhile the Bank of Uganda said it would start inflation targeting, and would shift focus to using interest rates rather than money supply to influence inflation. [more]

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The US Federal Open Market Committee held the fed funds rate unchanged at 0 to 0.25 percent, and announced that it would finish the $600 billion asset purchase program or "Quantitative Easing II". On quantitative easing the statement noted: "The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate." [more]

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The People's Bank of China raised the required reserve ratio by 50 basis points, taking the average rate to 21.5% for large banks (and 19.5% for smaller banks), effective 20 June 2011. The Bank said in a separate statment: "The Chinese economy is suffering some long-term and short-term problems that are interweaved, and co-existing systemic and structural problems,". The Bank also noted: "The loose global monetary conditions have pushed up inflation expectations and the prices of commodities which thus exacerbated China's imported inflationary pressure,".The People's Bank of China also raised the reserve requirements by 50 basis points in May this year to 21%. China reported inflation of 5.5% in May, up slightly from 5.3% in April, and 5.4% in March this year, and above the government's target of 4%. The move is expected to drain around 300-400 billion Yuan from the banking system. The People's Bank of China last raised the benchmark interest rate 25bps on the 5th of April this year. http://www.centralbanknews.info/2011/06/peoples-bank-of-china-raises-reserve.html[more]

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Central Bank News has launched an inflation targets table as a complement to the Global Monetary Policy Interest Rate Monitor. The initial launch of the table features the inflation targets of 25 countries. The inflation targets table has been added as part of building Central Bank News into a key resource on monetary policy and central banking.

As a background, central banks are often assigned policy targets in the implementation of monetary policy, for example GDP growth, maximum employment, and price stability. Inflation targets slot into the price stability goal, and some banks will be obliged to achieve certain inflation targets, e.g. the Bank of England has an inflation target of 2%. Meanwhile other banks may not have official targets but they will conduct monetary policy in the context of e.g. a government inflation target.

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The past week in central banking saw monetary policy decisions announced by 14 central banks around the world. Those that increased interest rates were: Poland +25bps to 4.50%, Brazil +25bps to 12.25%, and South Korea +25bps to 3.25%. While those that decreased interest rates were: The Bahamas -75bps to 4.50%, and Serbia -50bps to 12.00%. Meanwhile those that held rates unchanged were: Australia 4.75%, Armenia 8.50%, Croatia 6.00%, New Zealand 2.50%, Indonesia 6.75%, the European Union 1.25%, the United Kingdom 0.50%, Egypt 8.25%, and Peru 4.25%. While Croatia held its main policy rate at 6.00%, it also cut its discount rate -200bps to 7.00%.

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China's online real estate website, SouFun, recently released its monthly 100-city property price index, showing that property prices continued to rise in May. Property prices rose by 0.52% month on month in May to 8,819 Yuan per square meter, compared to an increase of 0.40% in April. This placed the annual percentage increase at about 5% (the index was first published in June last year). The data showed that prices rose in 76 cities, while 3 cities saw no change and 21 cities experienced lower prices in May. http://seekingalpha.com/article/273650-china-property-update-prices-still-chugging-along-in-may[more]

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This week we start by checking out a dismal Q1 GDP result for Australia. Then we examine the slight fall in China's manufacturing PMI (purchasing manager index), as well as the U.S. manufacturing PMI shocker. Following that is a quick check in on US consumer confidence and housing market. Finally a review of some monetary policy decisions over the past week is checked out, before the flurry of policy activity due next week.http://seekingalpha.com/article/273464-top-5-graphs-aussie-gdp-u-s-and-china-pmi-monetary-policy[more]

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Here's the economic calendar for the week commencing the 30th of May 2011. This week there’s a number of monetary policy decisions due from both emerging market and developed market central banks. There are also further revisions to Q1 GDP data due out from Japan and the eurozone. Among other data points due out this week is employment data from Canada and Australia, international trade flows for China, and some inflation metrics for Germany, the UK and US.http://seekingalpha.com/article/273428-economic-calendar-monetary-policy-gdp-inflation-and-china-trade-data[more]

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I recently watched this on a finance documentaries website, it's basically the hedge fund version of The Apprentice. This successful hedge fund manager tries an experiment with 1 million of his own cash to see if a bunch of regular people can be trained into successful hedge fund managers. He picks out some people (after interviewing many) and then gets some people in to give them some intensive training, then has a seasoned trader manage the team of newbies. Of course there's the usual reality TV drama e.g. arguments, firings, etc. But overall it is a really interesting experiment in investing/trading psychology - you see all the usual investing psychology stuff come out as the show unfolds... reaction to loss, decision making during uncertainty, loss vs profit etc etc [more]

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The past week in central banking saw monetary policy announcements from 10 different central banks. Of those announcing interest rate decisions, the following central banks increased their main policy interest rates: Colombia +25bps to 4.00%, Belarus +200bps to 16.00%, Kenya +25bps to 6.25%, Jordan +25bps to 4.50%, and Thailand +3.00%. Those that held interest rates unchanged were: Saudi Arabia 0.25%, Russia 8.25%, Canada 1.00%, and the West African States 4.25%. Russia did however increase another one of its interest rates, the overnight deposit rate, +25 basis points to 3.50%. Also announcing monetary policy changes was Vietnam, which increased its reserve requirements by 100bps, and lowered interest rate caps on US dollar accounts.Article source: http://www.centralbanknews.info/2011/06/monetary-policy-week-in-review-4-june.html[more]